The most important reason for establishing a corporation is the separation of debts between corporations and individuals. In other words, when operating a business in the form of a corporation, the independence of the individual owner is recognized and the individual owner does not have to bear responsibility for the debt of the corporation, so corporations such as corporations are often established. However, simply making a business or investment in the form of a corporation does not necessarily mean that these benefits can be enjoyed unconditionally. This time, we will look at the Trust Fund Penalty, where the National Tax Service (IRS) does the audit.
To put it briefly, a special individual must be responsible for the corporation as it is liable for the tax on the payment. This is because of the withholding because the National Tax Service does not pay the employee’s salary. Hired individuals are well aware that there are deductions from their salary. The tax refund that is sometimes returned at the end of the year tax report is to receive the additional amount paid out of the deducted amount.
Among the deduction items, there are several items such as the estimated amount of personal income tax, social security, and Medicare. The employer must pay to the IRS for a certain period of time for the deducted amount and the withholding tax. The same applies when the employer is a corporation. However, a corporation fails to pay such withholding amount or deduction to the National Tax Service. The IRS imposes a fine on the individual responsible for the unpaid amount as Trust Fund Penalty.
